Question 1

Financial planning models routinely adjust for present value and risk.

Accepted Answer

False

Question 2

Financial planning focuses on the big picture.

Accepted Answer

Financial planning focuses on creating a comprehensive strategy to meet an individual's or organization's financial goals, taking into account their current and future financial situation. It involves analyzing various financial factors and developing a plan that guides financial decisions towards achieving those goals. Therefore, it focuses on the big picture rather than individual transactional details.

Question 3

A typical horizon for long-term planning is five years.

Accepted Answer

A horizon of five years is commonly used for long-term planning in many industries and organizations. However, this can vary depending on the specific context and needs of the organization.

Question 4

The decision to acquire fixed assets is unrelated to the current level of excess capacity.

Accepted Answer

The answer of The decision to acquire fixed assets is...

Question 5

Financial managers should be trained early in their careers to question financial forecasts.

Accepted Answer

Financial forecasts are based on assumptions and are subject to many uncertainties. Trained financial managers should question the underlying assumptions, the accuracy of the data used, and the validity of the models used to make the forecasts. This requires a critical mindset and an ability to challenge the status quo. Early training in this skill can help financial managers become more effective in their roles and make better decisions for their organizations.

Question 6

Financial plans will succeed only if the forecasts are perfect.

Accepted Answer

Financial plans can still succeed even if the forecasts are not perfect. A well-planned financial strategy can adapt to changing circumstances and unforeseen events. It's important to regularly monitor and adjust the plan to ensure success.

Question 7

A firm cannot expect to expand its profit margin by acquiring one of its own suppliers.

Accepted Answer

Acquiring a supplier can help a firm to reduce costs, increase supply chain efficiency and control the quality of inputs, leading to an expansion of profit margin. However, there are a number of factors that can affect the success of such an acquisition, including cultural differences, integration challenges, and potential loss of trust with other suppliers. Therefore, while there is no guarantee that an acquisition will lead to profit margin growth, it is not accurate to say that it cannot be expected.

Question 8

Financial planning is concerned with possible surprises as well as the most likely outcomes.

Accepted Answer

Financial planning involves analyzing potential risks and uncertainties, and planning for how to address them in addition to the most probable outcomes.

Question 9

Financial planning should attempt to minimize risk.

Accepted Answer

The answer of Financial planning should attempt to minimize risk....

Question 10

Executives at Fruit Corporation forecast increased sales of 10% over the next year.$2,000,000 of assets will change in constant proportion to sales.If the addition to retained earnings is estimated to be $50,000,determine the required external financing.

Accepted Answer

The increase in sales is 10%, so the increase in assets is 10% of $2,000,000, which is $200,000. The addition to retained earnings is $50,000, so the required external financing is $200,000 - $50,000 = $150,000.

Question 11

Financial planning is a process of deciding which risks to take.

Accepted Answer

The answer of Financial planning is a process of deciding...

Question 12

Adaptability is not a desirable feature in financial plans.

Accepted Answer

Adaptability is a desirable feature in financial plans as it allows for adjustments to be made to accommodate changes in circumstances or goals. A flexible financial plan can adapt to new information, market conditions, or personal situations, making it more effective and sustainable in the long run.

Question 13

A planning horizon refers to the amount of time necessary to develop the financial plan.

Accepted Answer

A planning horizon refers to the period of time over which future financial projections are made, not the amount of time necessary to develop the plan.

Question 14

Financial planning is necessary because financing and investment decisions interact and should not be made independently.

Accepted Answer

Financial planning involves creating a comprehensive financial strategy that integrates financing and investment decisions in a way that achieves overall financial goals. To be effective, these decisions should not be made in isolation, as they can impact and depend on each other. For example, taking out a loan to invest in a high-risk investment may not be the best choice, as it could lead to financial losses that are difficult to recover from. On the other hand, investing in low-risk assets with excess cash can provide a good return on investment and increase financial stability.

Question 15

A forecast using a percentage of sales model expects sales to increase by 5% over each of the next four years.If costs are proportional to sales at 80%,and last year's sales were $1,000,the net income in the fourth year will be:

Accepted Answer

The answer of A forecast using a percentage of sales...

Question 16

A common,long-term corporate financial planning horizon would stretch for 15 to 20 years.

Accepted Answer

The common, long-term corporate financial planning horizon is typically 5 to 10 years, not 15 to 20 years.

Question 17

Dave's Wax Inc.'s financial planners have projected a growth rate of 8% for the coming year.Currently,it has assets of $5,000,000 and retained earnings of $120,000.Calculate the amount of external financing Dave will need:

Accepted Answer

The answer of Dave's Wax Inc.'s financial planners have projected...

Question 18

The primary aim of financial planning is to obtain better forecasts of future cash flows and earnings.

Accepted Answer

The answer of The primary aim of financial planning is...

Question 19

The dividend payout ratio is directly related to a firm's internal growth rate.

Accepted Answer

The dividend payout ratio is the proportion of earnings paid out to shareholders as dividends. A high dividend payout ratio means that a larger proportion of earnings is distributed to shareholders, leaving less money for the company to reinvest in growth. Therefore, a higher dividend payout ratio is likely to result in a lower internal growth rate, while a lower dividend payout ratio is likely to result in a higher internal growth rate.

Question 20

Debt can be used as a plug item in financial planning.

Accepted Answer

Debt can play an important role in financial planning as it can be used to determine the amount of money a person will need to save in order to pay it off, and can also impact their credit score and ability to obtain loans in the future.

Quiz 19: Long-Term Financial Planning